A reduction in Vat to reduce cross-border shopping has been ruled out by Minister for Finance Brian Lenihan.
He said today he had no plans to reduce the Vat rate to the UK level of 15 per cent, adding that it was not possible to estimate the effect on exchequer revenue of tax changes in other EU member states.
"In any case, I would point out that the weakening of sterling has had a far more significant impact on relative prices than any Vat changes in that regard," he added.
"It must be recognised that our starting point is different from the UK. We already have a low taxation economy, especially in the area of direct taxation."
Mr Lenihan said the lower starting position for direct taxation made it more difficult to reduce taxes further.
Already, he added, the State was borrowing over 10 per cent of all day-to-day spending on public services before capital spending.
"This is unsustainable, and we face difficult choices in bringing forward corrective measures,'' he added.
"The estimated €227 million, which will accrue in a full year from the VatT increase, will go some way towards funding necessary public services."
